When reconciling variable costing and absorption costing net operating income, fixed manufacturing overhead costs deferred in stock under absorption costing should be added to variable costing net operating income to arrive at the absorption costing net operating income.

Question

Quizplus · Accepted Answer

When preparing profit and loss accounts using both variable and absorption costing, it is necessary to reconcile the two profit figures by adding the fixed manufacturing overhead costs deferred in stock under absorption costing to the variable costing net operating income.

When Reconciling Variable Costing and Absorption Costing Net Operating Income